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University Hospitals, EMH Healthcare announce plan to merge

University Hospitals plans to merge with EMH Healthcare in Lorain County

EMH Elyria Medical Center is the health systemâs only inpatient hospital, with 387 beds. The planned merger with University Hospitals would potentially bring more specialty inpatient services to EMH, including pediatrics. EMH also has healthcare facilities in Amherst, Avon, North Ridgeville, Sheffield and Grafton.
(Lynn Ischay, The Plain Dealer)

University Hospitals is making a play for one of the few remaining independent hospital systems in the region, announcing plans today to merge with Lorain County's EMH Healthcare.

Officials at both institutions have signed a non-binding letter of intent to make EMH part of UH's health system, and expect an agreement to be complete by the end of the year.

If the two merge, UH would invest in EMH's facilities and programs and gain a foothold on the West Side, offering possible competition to the Cleveland Clinic's campuses at Medina Hospital and the new Avon Lake Family Health Center.

"We think that this is a natural progression for us," said UH's Chief Executive Thomas F. Zenty III of the expansion west. "We did not have inpatient capacity here, and this will give us an opportunity to do that."

The planned merger grew out of almost a year of discussion, officials said, and began after EMH started a consulting process in 2010 to determine the future of the hospital system.

"It's going to become very hard for small- and medium-size hospitals to remain independent in the future," said Dr. Donald Sheldon, EMH's Chief Executive Officer. "Most hospitals in the country, with the changes that are occurring with the Affordable Care Act, are looking at a more challenging environment."

View full sizeThomas F. Zenty III, left, CEO of University Hospitals, and Dr. Donald Sheldon, President and CEO of EMH Healthcare, said the two institutions have been in informal discussions about a merger for about three years. UH and EMH will work out the details of a merger over the next few months and could finalize the deal by the end of the year. Lynn Ischay, The Plain Dealer

The driving force behind these mergers is healthcare reform, which is putting financial pressure on all healthcare providers to work together more closely in the face of changes in the way hospitals will be reimbursed by federal and commercial insurers. Hospitals nationwide are concerned that payments from Medicare and Medicaid will continue to fall, as will those from private insurers.

The pressure is most acute for small community hospitals, said Mark Votruba, associate professor of economics at Case Western Reserve University, because they do not have the necessary size to shoulder the increasing costs of falling reimbursement.

"It's becoming more and more difficult for smaller systems or stand-alone hospitals to compete," he said. "Hospitals that are trying to maintain the old-fashioned model, given all the changes with healthcare reform, I think they've been under increasing pressure for a long time compared to the systems that are expanding."

Jeff Brausch, chairman of the board at EMH's parent company, Comprehensive Healthcare of Ohio, said that EMH did not make the decision to explore a merger because it is suffering financially. The health system recorded $241 million in operating revenue last year, down from $247 million in 2010. EMH declined to provide the system's operating costs for the same period.

"We wanted to be part of something that would thrive and not just continue to survive," he said.

Brausch said the healthcare climate made the decision to explore the merger a relatively easy one. Over the last few years, EMH had been looking at what size it needed to be in order to continue to remain solvent.

"As the changes associated with healthcare reform came about, that size ramped up dramatically," he said. In an effort to cut down on costs and improve efficiency, EMH partnered with fellow community hospitals Parma General and Southwest General Hospital to form the Community Health Collaborative in 2011. The collaborative allowed the three institutions to remain independent but work together in the areas of information technology, supply chain management, and physician integration and should not be affected by the merger.

It was helpful, Brausch said, but not sufficient.

"It was really necessary to have the joint horsepower of a larger organization," Brausch said.

EMH, which has 2,100 employees and a 387 bed-hospital in Elyria, is one of two hospital systems operating in Lorain County. Catholic Health Partners owns two hospitals in the region -- Mercy Regional Medical Center in Lorain and Mercy Allen Hospital in Oberlin.

UH and EMH will spend the next several months on the particulars of a merger: How much UH might invest in EMH's physical plant and other services; the demographics and healthcare needs of EMH's patients; and where the two institutions offer complementary or overlapping services.

Zenty and Sheldon said it's too soon to know how staffing at EMH may be affected.

"Our goal is not to do any contraction of services, but rather to grow and develop," Zenty said.

"We're looking to bring in services to the community that have not been available," Sheldon said. EMH does not currently have pediatric specialty services, for example, which UH Rainbow would be able to provide.

Brausch believes the merger is in the best interest of the Lorain County community.

"We expect this to be seamless for our patients. We truly believe that this is a situation where everyone will look back in a few years and think that this was the best possible position we could have put ourselves in."

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